How Are Currency Prices Determined?
Currency prices are affected by a large matrix of constantly changing economic and political conditions, but probably the most important are interest rates, government intervention, economic conditions, international trade, inflation or deflation, political stability, and in some cases, armed conflict. Governments sometimes actually participate in the foreign exchange market to influence the value of their currencies. Governments do this by flooding the market with their domestic currency in an attempt to lower the price or, conversely, buying in an effort to raise the price.This process is known as central bank intervention and it can result in dramatic, if short-lived, movement for the currency involved. See the USDCHF chart in Figure as an example. Prices soared 500 pips in less than one hour.
The USD appreciated over 500 pips in just one hour on September 6, 2011. This represents a $5,000 move on a standard 100,000-lot trade of the USDCHF.
[caption id="attachment_12935" align="aligncenter" width="550"] Swiss Central Bank intervention in the CHF[/caption]
By Michael Duane Archer
Copyrighted 2020. Content published with author's permission.
- How does reading worsen ones eyesight
- Why did my fries get so soggy
- Are streaming services legal
- Will Netflix produce original shows in Pakistan
- Does painting minimalism take great restraint
- How do intelligence agencies hire secret agents
- What does one do about chronic depression
- Indian Actor OM Puri is dead
- Do humans have more stamina than horses
- Was Swami Vivekananda against women education
- Is Magic Kingdom bigger than Disneyland
- Does IQ determine lifespan
- Is operations research related to data science
- How would you describe a perfect Friday
- What is the FBI Academy like
- How did Jane Fonda become an actress